Semi Month and Turn of The Month Effect in Indian Stock Market

ISSN: 2249-7196
IJMRR/April 2016/ Volume 6/Issue 4/Article No-13/531-538

J. Sudarvel et. al., / International Journal of Management Research & Review
SEMI MONTH AND TURN OF THE MONTH EFFECT IN INDIAN STOCK

MARKET
J. Sudarvel*1, Dr. R. Velmurugan2, Dr. K.Kumuthadevi3
1
Ph.D Research Scholar, Dept. of Management Studies and Research, Karpagam
University, Coimbatore, Tamilnadu, India.
2
Assoc. Prof, Dept. of Commerce, Karpagam University, Coimbatore, Tamilnadu, India
3
Prof. and Head, Dept. of Commerce, Karpagam University, Coimbatore, Tamilnadu,
India.
ABSTRACT
This study investigates the existence of a Semi month effect and Turn of the month effect in
Indian stock market. The study uses the daily return data of the Bombay Stock Exchange
(BSE) National Stock Exchanges (NSE) for the period ranging between April 2015 and
March 2016. After examining the random of the return series, we insist on Descriptive
statistics & paired „t” test to find the semi month effect and Turn of the month effect in India.
The outcomes confirm the Semi month effect and Turn of the month effect does not exists in
India. The results of the study imply that the stock market in India, is efficient during the
study period.
Keywords: Indian stock market, Semi month effect, Turn of the month effect, Bombay Stock
Exchange and National Stock Exchanges.
INTRODUCTION
The past 15 years of the Indian stock market can be considered as the most significant part of
the history where the market away through the post liberalization era of Indian economy and
witnessed the creation of Securities and Exchange Board of India. Which carried substantial
transparency in share market practices and thus succeeded to bring in faith of not only
national investors but also the global ones. Stock market plays a vital role for the economic
development of a country, by properly channeling the funds for productive purpose. The
proposition that a well-regulated stock market extends significant economic services is now
widely accepted and recognized by various academicians. Stock market assists economy as well
as individual investors by mobilizing the scarce resources and allocation in those sectors, which
employ them optimally. Stock market assists individual investors by providing continuous market
for securities. From economic point of view, a well-developed stock market has been considered
requisite for economic growth as well as improvements in country‟s productivity. The subject of
anomaly in the stock market has attracted the attention of researchers for a long time due to
its potential of producing abnormal returns during certain periods of the year. Anomaly refers
to the regular and repetitive fluctuation in a time series which occur periodically over a span
*Corresponding Author www.ijmrr.com 531

of less than a year. The existence of a pronounced seasonal behaviour in the market might
suggest some form of market inefficiency. The existence of seasonality in stock returns,
however, violates an important hypothesis in finance, i.e. Efficient Market Hypothesis
(EMH) because equity prices are no longer random and can be predicted based on past
pattern.
SEMI- MONTH EFFECT
Semi-month Effect, the mean return of the First Half Month has been compared to the rest of
the day of the month. The return of the first 15 days has been compared to rest of the day‟s
return of the month. The purpose of studying Semi-Month Effect is to find appropriate
investment time during fortnight month.
TURN-OF-THE- MONTH EFFECT
The trend of stock prices to increase during the last two days and the first three days of each
month, is called Turn of the Month Effect. For the purpose of this study, the average of the
return on the last two trading days of the preceding month, and the first three days of the
subsequent month were computed and compared with the mean return for the rest of the days
in the subsequent month.
REVIEW OF LITERATURE
Ashish Garg, B.S. Bodla and Sangeeta Chhabra (2010) in their study entitled “Seasonal
Anomalies in Stock Returns: A Study of Developed and Emerging Markets found that the
semi month effect does exists both in Indian stock market as well as US stock market. Semi-
Monthly Effect, the mean return of the First Half Month has been compared with the average
return of the rest half of the month. Ercan Balaban and Meliha Bulu (1996) in their study
entitled “Is There a Semi-Monthly Effect in the Turkish Stock Market?”found that the semi-
monthly or intra-month effects do not exists in the Turkish Stock Market. Their study results
imply that aggregate stock returns in Turkey appear to be generated by different factors
compared to those in the developed markets where semi-monthly effects have been present in
almost all. Therefore, international portfolio diversification works. Eleftherios Giovanis
(2009) in his study entitled “Calendar Effects and Seasonality on Returns and Volatility”
found that the semi-month effect, where in 7 and 2 cases accept for both first and second half
of the month returns are significant lower and higher, both India and Canada first half of the
month noticed higher returns and lower returns noticed in the second half of the month.
Nageswari. P and Dr.M. Selvam (2011) in their study entitled “Calendar Anomalies in the
Indian Stock Market”found that the Semi Month Effect did exist in the Indian Stock Market
returns during the study period (2002–2010). Siqi Guo and Zhiqiang Wang (2007) in his
study entitled “Market efficiency anomalies a study of seasonality effect on the Chinese stock
exchange”found that the semi-month effect does not exist in Chinese stock market. Amy
Dickinson and David R. Peterson (1995) in their study entitled “Expectations of weekend
and Turn-of-the-Month Mean Return Shifts Implicit in Index Call Option Prices” proves turn-
of-the-month effect are at least partially anticipated in United States.”Ashish Garg, B.S.
Bodla and Sangeeta Chhabra (2010) in their study entitled “Seasonal Anomalies in Stock
Returns: A Study of Developed and Emerging Markets” found that the turn of the month
Copyright © 2016 Published by IJMRR. All rights reserved 532

effect does exists both at Indian stock market and US market. Efficiency of the stock markets
is closely related to the allocation of scarce capital resources. The allocation of capital
resources to their most productive use can only be achieved in the presence of an efficient
pricing mechanism, which requires an efficient dissemination of the information. Archana. S,
Mohammed Safeer and Dr.S. Kevin (2014) in their study entitled “A Study on Market
Anomalies in Indian Stock Market” found that the Turn of the month effect are minimally
visible but not statistically proven for the analysed period. Due to their timely actions prices
of stocks quickly adjust to the new information, and reflect all the available information. So
no investor can beat the market by generating abnormal returns. Eleftherios Giovanis (2009)
in his Study entitled “Calendar Effects and Seasonality on Returns and Volatility” found that
the turn-of-the-month effect is still persistent only in two stock indices, in Yugoslavia and
Sweden. Reason for turn-of-the-month effect the transaction cost, which are too high for the
investors to profit from this calendar anomaly, as the investors cannot exploit the pattern.
Erhard Reschenhofer (2010) in his study entitled “Further Evidence on the Turn-of-the-
Month Effect” strongly corroborate the existence of the turn-of-the-month effect in the S&P
500 index.
OBJECTIVE OF THE STUDY
To identify the existence of the Semi Month Effect and Turn of the Month Effect in Indian
Stock Market.
RESEARCH METHODOLOGY
This study is analytical in nature. Secondary data collected from the BSE and NSEweb portal
for the period ranging between April 2015 and March 2016.
FRAMEWORK OF ANALYSIS
The collected data have been analysed by making use of Descriptive statistics like as Mean,
Standard Deviation, Variance, Skewness, Kurtosis and Shapiro-Wilk test and paired „t‟test.
LIMITATION
Considering the continuity of data, the only BSE Sensex and NSE Nifty has been selected for
the study. Hence, utmost care is exercised while generalizing the result.
ANALYSIS AND INTERPRETATION
To find the mean returns, volatility and Normality in the BSE Sensex and NSE Nifty index
descriptive Statistics like Mean, Standard deviation, Variance, Skewness, Kurtosis, and
Shapiro-Wilk test are made use of the following table narrates the result of descriptive study.
Semi Month Effect BSE Sensex Index
Table 1
Mean Std. Deviation Variance Skewness Kurtosis Shapiro-Wilk
FIRST HALF -0.0662 0.39685 0.157 0.388 -0.937 0.614
SECOND HALF 0.0216 0.33477 0.112 -0.951 -0.28 0.051
High mean returns were noticed during the Second half of the month (0.0216) and low mean
returns were found during the First half of the month (-0.0662). While comparing the

variance, high level of volatility was noticed on the First half of the month (0.157) and low
level of volatility was noticed in Second half of the month (0.112).
Result of the Skewness test disclosed that positive returns were noticed in the first half of the
month returns, which implies that most of the first half of the month returns were more than
the average returns. The Second half of the month returns found negative Skewness, which
implies that rest of the month returns were less than the average returns. The Kurtosis results
of the BSE Sensex index returns were found platykurtic in both the first half of the month
(0.388) and Second half of the month (-0.951). Since, Kurtosis values are less than 3, thus, it
is inferred that the level of risk associated with the first half of the month and Second half of
the month returns of the BSE Sensex index was low, which means investors may obtain
either low level of profit or loss.
As the calculated P value of the Shapiro-Wilk test is greater than 0.05, it is clearly proved
that the data are normally distributed. Hence, anomaly does not exists inthe BSE
Sensexindex.
Semi Month Effect BSE Sensex Index
Table 2
Mean N Std. Deviation Paired t value P value
First Half -.0662 12 .39685
-.522 0.612
Second Half .0216 12 .33477
Source – Database collected from BSE web portal and computed.
As the calculated P value is greater than 0.05, it is inferred that BSE Sensex index returns
does not differ between the first half and the Second half of the month.
Semi Month EffectNSE Nifty Index
Table 3
First half -0.0065 0.03968 0.002 0.354 -0.89 0.691
Second half 0.0025 0.03459 0.001 -0.964 -0.264 0.055
Source – Database collected from NSE web portal and computed.
High mean returns were noticed during the Second half of the month (0.0025) and low mean
returns were found during the First half of the month (-0.0065). While comparing the
variance, high level of volatility was noticed on the First half of the month (0.002) and low
level of volatility was noticed in Second half of the month (0.001).
the average returns. The Second half of the month returns found negative Skewness, which
implies that rest of the month returns were less than the average returns. The Kurtosis results
of the NSE Nifty index returns were found platykurtic in both the first half of the month
(0.354) and Second half of the month (-0.964). Since, Kurtosis values are less than 3, thus, it
is inferred that the level of risk associated with the first half of the month and Second half of
the month returns of the NSE Nifty index was low, which means investors may obtain either
low level of profit or loss.

that the data are normally distributed. Hence, anomaly does not exists inthe NSE Nifty index.
Semi Month EffectNSE Nifty Index
Table 4
First Half -.0065 12 .03968
-.533 0.605
Second Half .0025 12 .03459
As the calculated P value is greater than 0.05, it is inferred that NSE Nifty index return does
not differ between the first half and the Second half of the month.
Turn of the Month Effect BSE Sensex Index
Table 5
First Half 0.1127 0.63691 0.406 0.914 -0.319 0.084
Rest of the Month -0.0992 0.23114 0.053 -0.205 -1.209 0.424
High mean returns were noticed during the First half of the month (0.1127) and low mean
returns were found during the rest of the month (-0.0992). While comparing the variance,
high level of volatility was noticed on the First half of the month (0.406) and low level of
volatility was noticed in rest of the month (0.053).
the average returns. The rest of the month returns found negative Skewness, which implies
that rest of the month returns were less than the average returns. The Kurtosis results of the
BSE Sensex index returns were found platykurtic in both the first half of the month (-0.319)
and rest of the month (-1.209). Since, Kurtosis values are less than 3, thus, it is inferred that
the level of risk associated with the first half of the month and rest of the month returns of the
BSE Sensexindex was low, which means investors may obtain either low level of profit or
loss.
that the data are normally distributed. Hence, anomaly does not exists inthe BSE
Sensexindex.
Turn of the Month Effect BSE Sensex Index
Table 6
First Half .0169 12 .05072
1.040 0.321
Rest of the Month -.0120 12 .02116
As the calculated P value is greater than 0.05, it is inferred that BSE Sensex index returns
does not differ between the first half and the rest of the month.

Turn of the Month EffectNSE Nifty Index

Table 7
First Half 0.0169 0.05072 0.003 1.028 0.329 0.104
Rest of the Month -0.012 0.02116 0.001 -0.393 -1.439 0.181
High mean returns were noticed during the First half of the month (0.0169) and low mean
returns were found during the rest of the month (-0.0126). While comparing the variance,
high level of volatility was noticed on the First half of the month (0.003) and low level of
volatility was noticed in rest of the month (0.001).
the average returns. The rest of the month returns found negative Skewness, which implies
that rest of the month returns were less than the average returns. The Kurtosis results of the
NSE Nifty index returns were found platykurtic in both the first half of the month (1.028) and
rest of the month (-0.393). Since, Kurtosis values are less than 3, thus, it is inferred that the
level of risk associated with the first half of the month and rest of the monthreturns of the
NSE Nifty index was low, which means investors may obtain either low level of profit or
loss.
that the data are normally distributed. Hence, anomaly does not exists inthe NSE Nifty index.
Turn of the Month EffectNSE Nifty Index
Table 8
First Half .0169 12 .05072
1.899 0.084
Rest of the Month -.0120 12 .02116
As the calculated P value is greater than 0.05, it is inferred that NSE Nifty index returns does
not differ between the first half and the rest of the month.
FINDINGS
Semi Month Effect
1. BSE Sensex and NSE Nifty index highest mean return was noticed in the Second half of
the month, then the First half of the month.
2. High volatility was noticed during the First half of the month in Indian Stock Market.
3. Skewness test discloses that negative returns are noticed in the second half of the month
returns.
4. Skewness test discloses that positivereturns are noticed in the First half of the month
returns.
5. The Kurtosis of BSE Sensex and NSE nifty index returns were founded leptokurtic in
both the first half of the month and second half of the month.

6. Shapiro-Wilk test clearly proved the BSE Sensex and NSE Nifty index data are normally
distributed.
7. As the calculated P value is greater than 0.05, it is inferred that BSE Sensex NSE Nifty
index return does not differ between the first half and the Second half of the month.
Turn of the Month Effect
1. BSE Sensex and NSE Nifty index highest mean return was noticed in the First half of the
month, then the rest of the month.
2. High volatility was noticed during the First half of the month in Indian Stock Market.
3. Skewness test discloses that negative returns are noticed in the second half of the month
returns.
4. Skewness test discloses that positive returns are noticed in the First half of the month
returns.
5. The Kurtosis of BSE Sensex and NSE nifty index returns were founded leptokurtic in
both the first half of the month and second half of the month.
6. Shapiro-Wilk test clearly proved the BSE Sensex and NSE Nifty index data are normally
distributed.
7. As the calculated P value is greater than 0.05, it is inferred that BSE Sensex NSE Nifty
index return does not differ between the first half and the Second half of the month.
SUGGESTIONS
Semi Month Effect
The study found that the highest mean returns were documented in the Second half of the
month return in the Semi-Month effect. Hence, Indian investors are advised to buy scripts
during the First half of the month and sell them on a Second half of the month period which it
will give better returns.
Turn of the Month Effect
The study found that the highest mean returns were noticed in the first half of the month.
Hence, Indian investors are advised to buy scripts during the rest of the month and sell the
shares during First half of the month, which will give better returns. Investors could
experiment the above policy, to start with, on small stocks and extend the same on blue-chips
based on the risks and rewards.
CONCLUSION
The study focused on the existence of a Semi Month Effect and Turn of the month effect in
the BSE Sensex and NSE Nifty index in India. The analysis Semi Month Effect of descriptive
statistics displayed that the BSE Sensex and NSE Nifty index highest mean return was
noticed in the Second half of the month, then the First half of the month. The analysis Turn of
the Month Effect of descriptive statistics displayed that BSE Sensex and NSE Nifty index
highest mean return was noticed in the First half of the month, then the rest of the month. The
Calculated paired „t‟ test value is Not significant the Semi month Effect andturn of the month
effect does not exist in the BSE Sensex and NSE Nifty index. The study point out that stock
returns in India are entirely random. This suggests that the Indian stock market is efficient.

REFERENCES
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IJMRR/April 2016/ Volume 6/Issue 4/Article No-13/531-538

SEMI MONTH AND TURN OF THE MONTH EFFECT IN INDIAN STOCK

*Corresponding Author www.ijmrr.com 531

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